Coventry and Skipton Building Society have entered into a best buy easy-access cash Isa battle.
Coventry has raised its rate to 5.05 per cent, while Skipton has upped the rate on its cash Isa to 5 per cent.
It comes a few weeks after both mutuals launched these accounts, shooting them to the top of the best buy tables.
Both rates have increased from 4.9 per cent, and if you opened either of these accounts a few weeks ago at this rate, you will automatically receive the new rates of 5.05 per cent and 5 per cent the building societies told This is Money.
Best buy Isa duel: Coventry Building Society and Skipton Building Society have upped the rates on their cash Isa accounts
Coventry’s Four Access Cash Isa now has the market-leading rate at 5.05 per cent.
But as its name suggests, it only allows four withdrawals in a 12 month period starting from the date the account was opened.
If you make a fifth withdrawal you will lose 50 days worth of interest. On the maximum deposit of £20,000 that’s almost £151.
If you can afford to forgo the flexibility of unlimited withdrawals, this is the best rate you can get on an easy-access cash Isa.
Skipton’s account, on the other hand, has no limit on the number of withdrawals you can make so it is a true easy-access account.
But savers need to be aware that Skipton’s account has a bonus rate for the first 12 months of 1 per cent, so after this the rate will fall to 4 per cent.
Both accounts can be opened from £1 and allow you to deposit £20,000 in each tax year, so you will have until April 2024 to max them out. The accounts also both allow transfers in from other Isas.
Which account has the edge?
Andrew Hagger, founder of MoneyComms says: ‘It’s a really close call. If you’re happy to open and manage the account online and you’re sure you won’t make more than four withdrawals, then Coventry just edges it due to rate.
The Skipton deal can be opened online but also by post, phone and in branch so may have a slightly wider appeal.
Mr Hagger notes that the top six easy access cash Isas at the moment all have some form of withdrawal restriction or bonus element built in.
He says: ‘If you’re looking for a totally clean no-strings easy access Isa then Shawbrook Bank is the best deal at 4.93 per cent.
‘If you look at a £20,000 maximum cash Isa balance, Shawbrook would earn you £986 interest in a year compared £1,010 with Coventry’s 5.05 per cent deal – so if you’re in any doubt regarding the number of times you’re going to need to dip into your account over 12 months I’d plump for the Shawbrook deal.’
The cash Isa rates being boosted are a response to demand for higher interest on tax savings.
The rise in interest rates over the last year and a half has, by and large, been good news for savers who can now nab accounts paying interest upwards of 5 per cent.
But rising rates have proven to be a double-edged sword, as they put many more savers in danger of breeching their personal savings allowance (PSA).
At least a million more savers are expected to pay cash on their savings as a result of higher rates.
Basic rate taxpayers can earn up to £1,000 a year in interest before they need to pay tax on their savings accounts, while higher rate taxpayers have a PSA of £500.
Those paying additional rate tax – earning more than £125,140 a year – get no personal savings allowance at all.
This is why many more savers are choosing to shelter their savings into tax-free Isa accounts.
